Indian Manufacturing Shrinks for First Time in Four Years

By REUTERS

September 2, 2013

BANGALORE, India — Indian factory activity shrank for the first time in more than four years last month, a survey showed Monday, adding to the country’s deepening economic malaise even as the central bank struggles to defend the battered rupee.

The bleak purchasing managers’ index comes hard on the heels of data Friday that showed Asia’s third-largest economy had grown at its slowest quarterly rate in the three months to June since the global financial crisis, suggesting more pain ahead.

The HSBC Manufacturing P.M.I., compiled by Markit, sank to 48.5 in August from 50.1 in July, the lowest reading since March 2009. Economists polled by Reuters had expected a fall to 49.9.

The index, which gauges business activity in Indian factories but not utilities, had been close to the 50 mark that separates growth from contraction since May, but falling orders dragged it under last month.

“Manufacturing activity contracted in August for the first time since March 2009. This was led by a decline in new orders, especially export orders,” said Leif Eskesen, chief economist for India at HSBC, the survey’s sponsor.

The survey showed new export orders shrank for the first time in a year.

In a sign that domestic demand is also faltering, new orders, which include domestic orders, shrank at a faster pace. The index fell for the sixth straight month to 47.5 in August, its lowest since February 2009.